Securitization Affects All Walks of Life

A close friend of mine attended a gala recently. Judges, legislators, clergy, all in the same room. They did not know each other beforehand. They came for the celebration, set business aside, and shared family stories. For one night, they were drawn together by a common purpose.

I thought about that event afterward. Every day, battle lines are drawn in the foreclosure war. The people drawn into the fight come from all walks of life. Movie stars lose mansions. Doctors and small business owners struggle to make payments because they are mortgaged to the hilt. Teachers, lawyers, tradespeople. I have talked to all of them in 12 years of forensic mortgage investigation.

The only difference between them and the average Joe is that their bills are bigger. They felt the economic downturn. Their businesses lost profitability. Their bottom dollar shrank. But they struggle alongside everyone else to hold onto the piece of the American dream they fought to get.

Foreclosure Does Not Discriminate

Foreclosure happens to doctors, lawyers, business owners, and teachers. It happens to people from every profession and every income bracket. The idea that foreclosure only affects people who bought more house than they could afford is a fiction. The securitization of mortgage loans and the wrongful foreclosure practices that follow do not discriminate. The banks do not care what you do for a living when they come for your property.

The Banks Fight Everyone

The banks fight just as hard against the affluent professional. They want control of the economic numbers attached to properties with a presumed deficiency. A $125,000 home and a $1,500,000 home get the same treatment. Wrong is still wrong.

The banks make money on principal reductions given to homeowners. Where is it written that a lender must make 200% profit on a loan to be satisfied? Everything possible is done to avoid settling. Most homeowners I have talked to want a fair shake, not a free house. I see nothing wrong with pursuing a settlement at fair market value with a fair fixed interest rate.

The Banks Have No Skin in the Game

The interest rates remain at historic lows. The money used to fund your loan was not the bank’s money to begin with. The banks have no skin in the game. As stated on page 3 of the 1961 Publication of the Federal Reserve Bank of Chicago, Modern Money Mechanics:

“Bankers discovered that they could make loans merely by giving their promises to pay, or bank notes, to borrowers. In this way, banks began to create money. More notes could be issued than the gold and coin on hand because only a portion of the notes outstanding would be presented for payment at any one time.”

The money lent to you was not the bank’s money. The bank created it through the fractional reserve system. They lent you money they did not have, then charged you interest on it. When the loan is securitized, the Intangible Payment Obligation is sold to investors. The bank has already been made whole. The bank has no risk. The bank has no loss. Yet they fight tooth and nail to take your home through foreclosure.

The Same Rules Apply to All

The Uniform Commercial Code does not have a different set of rules for wealthy homeowners. The rules for proper transfer of negotiable instruments under UCC Article 3, proper assignment of security interests under UCC Article 9, and proper chain of title are the same for a $125,000 home as they are for a $1,500,000 home. The banks are required to follow the same laws in every case.

The problem is that the banks have been allowed to ignore these laws for so long that noncompliance has become standard practice. A securitization audit examines whether the rules were followed in your specific case. The securitization process, done correctly, is a legitimate financial tool. But when the rules are not followed, when the Intangible Payment Obligation is separated from the Tangible Promissory Note, when the assignments are executed years after the fact on the eve of foreclosure, the process is defective.

Come Together as a Community

We need to come together as a community and share what we know. The banks count on homeowners being isolated, uneducated, and afraid. They count on the average homeowner not understanding the Uniform Commercial Code, not understanding securitization, not understanding their own mortgage documents.

When homeowners share knowledge, the dynamic shifts. The movie star who lost a mansion and the teacher who lost a modest home are fighting the same battle against the same system. The errors in the chain of title are the same. The defects in the securitization process are the same. The remedies available under the law are the same.

Strength in numbers. Power in education. The more we understand about what happened to our loans, the better equipped we are to fight back.

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Joseph Esquivel, Mortgage Compliance Investigators. Copyrighted, all rights reserved.